UK: Risk Of Wasted Costs Orders

In the recent decision in Joyce Whitfield v Revenue
& Customs Commissioners [2016] UKFTT 685 (TC) the Tribunal
considered that inflexible and disproportionate behaviour by a
party's legal representative, which resulted in a hearing
having to be adjourned, warranted an award of wasted
costs.

The Tribunal's comments will be instructive also for
cases conducted under the Civil Procedure Rules ("CPR").
Further, they serve as a useful reminder that parties to litigation
are under a positive duty to assist in promoting the overriding
objective and both they and their legal representatives can be
penalised in costs if this duty is breached.

Where a legal representative has behaved in a manner that is
improper, unreasonable or negligent in the conduct of proceedings,
there is statutory power (section 51(6) of the Senior Courts Act
1981) for an order to be made against that representative for the
costs incurred by a party (including the legal representative's
own client) as a result of that conduct. The court also has an
inherent jurisdiction to make such orders. These costs cannot be
passed on as a charge to the client.

In the Whitfield case, which was an appeal against a
tax assessment, a directions order had been made under which the
parties were required to provide lists of documents to each other
on 26 February 2016. HMRC's documents were sent to Mr Jones,
the legal representative of the claimant, Mrs Whitfield, three days
late. On receiving the relevant letter, Mr Jones opened the
envelope and appreciated what the documents were, but did not read
them and instead returned them to HMRC "because they were
late". As the documents were highly relevant to the
proceedings and in the absence of any compelling reason to rule
otherwise, the Tribunal subsequently directed that the documents
should be admitted into evidence. However, as Mr Jones had not read
them, it was necessary to grant an adjournment of his presentation
of Ms Whitfield's case, to allow him time to consider the
documents. In the circumstances, the Tribunal considered it was
appropriate that Mr Jones should pay HMRC's wasted costs of the
adjourned hearing.

In reaching its decision, the Tribunal had regard to the
overriding procedural objective to deal with cases fairly and
justly (contained in the Tribunal Procedure (First-tier Tribunal)
(Tax Chamber) Rules 2009). Under Rule 2(4) the parties have an
obligation to help the Tribunal to further the overriding
objective, and Rule 2(2) explains that dealing with a case fairly
and justly includes acting in ways which are proportionate to the
importance of the case, avoiding unnecessary formality and seeking
flexibility in the proceedings. The Tribunal considered it was not
proportionate for Mr Jones to have opened an envelope, seen what it
contained and yet to have returned the contents to HMRC unread,
just because the documents were received a few days late. This
behaviour was not flexible and failed to avoid unnecessary
formality. The adjournment would not have been necessary had Mr
Jones not adopted this approach.

Although the relevant provisions in Part 1 of the CPR concerning
the overriding objective are not drafted in identical terms to the
Tribunal Procedure Rules, they contain materially the same
language: i.e. cases are to be dealt with "justly and at
proportionate cost" and "expeditiously and fairly"
(CPR 1.1) and the parties are required to help the court to further
the overriding objective (CPR 1.3).

Every indication is that a breach of the duty in the CPR to help
the court to further the overriding objective may also be met with
costs penalties being imposed in appropriate cases, including
wasted costs orders against a party's legal representatives.
See for instance Albon v Naza Motor Trading Sdn Bhd [2007]
EWHC 2613 (Ch), Denton v White Ltd [2014] EWCA Civ 906 and
in particular Davies v Forrett [2015] EWHC 1761 (QB).

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